Euro Backs Off From Historic Peak vs. Dollar

The euro retreated from a record high against the dollar in choppy trade Thursday after a top euro zone official called recent euro appreciation "undesirable."

The euro was down versus the dollar, but off session lows.

Dollar and Euro

The euro backed off its record in early New York trade after Eurogroup head Jean-Claude Juncker said excessive exchange rate volatility was bad for global growth and called euro gains against the dollar "undesirable." The Eurogroup comprises the finance ministers of the 15-country euro zone.

"The market is chasing its tail today, trying to take out $1.60 overnight before Juncker's comments took everyone by surprise and wiped out some euro longs," said Steven Butler, head of FX trading at Scotia Capital in Toronto.

"Then people got caught the other way and pushed the euro above $1.59." Juncker's remarks about currency volatility echoed last week's statement from Group of Seven developed countries, which he said markets had misunderstood.

That sparked concern that G7 officials may be considering coordinated currency intervention to stem the dollar's decline.

"It's created confusion in the market," said Niels Christensen, currency strategist at Nordea in London.

Butler, though, said it remains "tough to read between the lines and know whether the verbal chatter from the G7 is going to be enough to stem the euro's rise," adding that "the fundamentals indicate the euro has more room to the top side." Indeed, analysts said that as long as the U.S. Federal Reserve keeps cutting interest rates and the European Central Bank refuses to cut them, coordinated G7 currency intervention will not fly.

The ECB has left rates at 4 percent for more than a year to fend off record high euro zone inflation, while the Fed is expected to cut rates again this month to support an economy struggling under the weight of deep housing and credit crises.

Elsewhere, the dollar was up against the yen , while the euro rose versus the yen .

The dollar also gained against the Swiss franc .

Sterling got a shot in the arm after a source close to the situation said British authorities could announce as early as next week the details of a plan to ease tight conditions in the mortgage market.

The pound was up versus the dollar .

A smaller-than-expected first-quarter loss at Merrill Lynch also boosted the dollar, easing fears among investors who expected the Wall Street bank to take a larger earnings hit.

Data showing U.S. first-time jobless claims rose by slightly less than expected in the latest week added modest dollar support.